Getting out of the rut
Nose-diving demand and the resultant low-capacity utilisation have already put enormous pressure on the cement manufacturers. Reduced level of capex spending on new projects is due to regulatory hurdles and inordinate delays in clearances; higher cost of borrowing is another major bottleneck to new investments in the cement sector. To this end, issues of regulatory hurdles in land acquisition, mining leases and environmental approvals need to be addressed, on a priority basis.
For the sustainable growth of any industry, there are three indispensable pillars that support the super- structure: adequate demand, easy availability of input materials and efficient and cost- effective modes of transport. However, given the acute supply constraints of input materials and logistics support to the cement industry, which keeps on aggravating every year, experts feel that unless and until government policies create a climate which results in a committed increase of demand, and measures to ensure requisite supply of input materials and logistics support, the industry cannot grow to its full potential. Taxation is too highly skewed for cement and the industry would like to see a rationalised tax structure.
Even if 2014 may throw challenges at us, challenges like a non-conducive policy environment, indirect tax regime, widespread industry fragmentation, high credit costs and lack of an adequate and robust infrastructure, overall there are good vibes gathering, and the long-term outlook is quite positive. The cement industry being a core sector, the medium and long-term view should be taken in view, and that view certainly looks promising. Demand will certainly bounce back on track and excess capacity will bottom out in the next couple of years.
A Happy and Prosperous New Year!
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